Working Paper Revision

When Regional Isn't Aggregate: Joint Estimation of Government Transfer Multipliers

Abstract: We develop a framework that jointly identifies local and aggregate effects of government transfer shocks with cross-state spillovers. Using the aggregate Romer–Romer Social Security transfer shock series and relative state-level exposure to the shock, we combine the two variation sources to recover the local, spillover, and aggregate multipliers. The specification is aggregation-consistent: state coefficients sum to the aggregate response, making the decomposition of the national effect into local and spillover components transparent. The aggregate multiplier is positive and roughly half the local multiplier, with both statistically different from zero. Spillover estimates are negative but imprecise. Estimates are robust to the inclusion of business-cycle controls and to an instrumental variables specification. A principal components based diagnostic exercise suggests that the framework captures the main cross-state propagation patterns in the data.

JEL Classification: E62; J32;

https://doi.org/10.20955/wp.2025.028

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2026-07-03

Number: 2025-028

Related Works

• Working Paper Revision (2026-07-03) : You are here.
• Working Paper Original (2025-10-07) : When Regional Isn’t Aggregate: Joint Estimation of Government Transfer Multipliers